The Causes and Impact of Software Piracy

1 Software Piracy Executive summary The origin of software piracy stems from mid 1970s when Dan Sokol successfully copied the language of Robertson’s Altair 8800 computer. From then on piracy has taken a new turn and evolved into becoming a parallel industry competing with the mainstream ICT sector. From the definition of piracy as a practice of illegal copying, sharing, selling, or downloading of copyrighted software, it becomes obvious that the vice is an infringement of intellectual rights. However, software piracy in many parts of the world is a necessary evil for ICT development. The main causes that have contributed to the spread of software piracy are the high costs of genuine software and the ease in access to pirated software. Due to the cheap nature of pirated software together with their ease of access, genuine developers are facing negative economic impacts. Consequently, these developers are continually becoming demoralized to engage in product improvement, fearing that all their hard work will do little to prevent further piracy.

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2 The increasing burden of piracy eventually causes enterprises of genuine developers to collapse. The morality of using pirated software has not done much in discouraging the spread of the vice. Individuals do not feel like they have an ethical obligation not to trade, copy, use, and distribute pirated software; as a matter of fact, many are proud to proclaim that they have access to a cheaper and more available version of software than the genuine but an expensive one. In order to protect software developers, governments should start treating software piracy with the seriousness it deserves. Secondly, a lot has to be done to lower the high prices of genuine software and promote access to genuine software through government intervention. This intervention could take the form of a tax break or incentive and strict penalties for those engaging in the trade of counterfeit software. Thirdly, the governments could do more to encourage capacity building in their respective ICT sectors. Fourthly, a lot has to be done to sensitize the public on the ethics and morality associated with the use of pirated software.

3 Software Piracy Introduction The issue of copyright infringement and piracy in the information and communication technology (ICT) sector is as old as the sector itself. In order to appreciate the impacts of piracy of the ICT sector, it is imperative to understand the evolution of the vice from a complementary service into a fully fledged competitor in the sector. At first piracy began as a means of spreading the new technology of computers in the mid 1970s when Ed Robertson’s company, the Micro Instrumentation Telemetry System (MITS), was reigning. The basic kit for running the system cost about $400 and was running on the BASIC programming language. Setting up the Altair 8800 computer that ran on the system was a challenging matter; hence it took time for programming to be paired with the device. This length in setting up the computer resulted in enthusiasts looking for means to improve on the bugging of the code so as to provide the code faster to users. Thus, Dan Sokol became successful in copying the pattern of the punch card and was able to run the program; hence the first pirated software application (Leinss 2011, p. 1-2).

Piracy has taken a totally new direction from the early days where it improved the original product. Instead, over time software piracy has evolved into a practice motivated by financial gain with little regard to improving the quality of the software at hand (Depken & Simmons 2004, p. 97). Presently, software piracy thrives parallel to the mainstream software developers and is giving the mainstream tech companies problems (Anckaert et al. 2004, p. 3). Stopping the proliferation of pirated products has grown to become a serious challenge due to the developments of the internet. Unlike in

4 the infant stages of the vice where manual coping of the pirated material thrived, the internet has made the spreading of pirated products become extremely easy. What this has meant is that accessing pirated software has now in effect become much easier than getting original and genuine products. This report observes the causes of piracy, the economic impacts of practice, the impact on software development, and the moral and ethical perspective of using pirated products. By so doing, a link between the background causes can be connected with the impacts of piracy and sufficient methods of curbing the practice can be put into place.

Software piracy: Definition In order to understand the causes and reasons why software piracy continues to represent a challenge to the ICT sector, it is essential to define what software piracy is in the first place. According to the Business Software Alliance (BSA), software piracy can be defined as, “the illegal copying, downloading, sharing, selling or installing of copyrighted software” (Duquenoy et al. 2008, p. 38). Based on this definition, in a nutshell software piracy can be described from a copyright infringement point of view.

What this means is that ideally, software piracy falls under intellectual property rights of which any form of replication or infringement makes it illegal in most parts of the world.

All nations that are signatories to the trade related aspects of intellectual property rights (TRIPS) agreement should be at the center of the fight against software piracy (Duquenoy et al. 2008, p. 68-70). However, software piracy remains an overlooked aspect of copyright infringement of which many perceive as being a necessary evil needed to spur global ICT development (Anckaert et al. 2004, p. 7).

Causes of Piracy

5 Costs The single largest causes of software piracy are those of costs and access. In order to appreciate the widespread existence of piracy one need not look any further than the costs of genuine and original products. Peddlers in pirated software have been able to expand their trade in bounds due to the competitive nature of their prices, which for an expedient measure are usually a lot cheaper than the genuine product (Depken & Simmons 2004, p. 100). As a matter of fact, the price difference between a genuine product and the pirated commodity might have a difference in excess of 90% in financial value in favor of the pirated copy (Shubhnandan & Nishant 2012, p. 33). This has made piracy thrive because now software developers are faced with the daunting task of facing fiercer competitors, the pirates (Craig & Honick, 2005, p. 35). To be fair to the genuine software developers, they have to keep their prices high so as to gain profitably from their investments. Unlike the pirates, the developers have genuine fiscal responsibilities such as paying taxes, labor and production costs. These costs reflect in the final price.

Access The other cause is that of access; genuine developers run their distribution networks like mainstream firms. This means that in order to take their products to the consumers they rely on renowned software stores and online platforms that can guarantee the consumer quality of their product (Craig & Honick 2005, p. 75-77). The downside to this is that fewer outlets become available to distribute genuine products compared to the easy access to pirated software. On the flip side though is the juggernaut that is piracy; the trade does not necessarily depend on a well structured

6 distribution arm that aims at offering money-back guarantees on quality. On the contrary, the very nature of the vice has made distribution of pirated copies over the internet become among the easiest and most accessible products online (Shubhnandan & Nishant 2012, p. 33). File hosting and sharing sites require remarkably little if any identification and in cases that they charge for their commodities, they charge extraordinarily cheaply for them.

Impact of Piracy The impacts can be observed in terms of their economic reflections and effects on the general growth of the genuine providers in terms of expansion, research and development. Although piracy offers the consumers of their products economic advantages on account of their pricing, the reverse happens to be true for the software developers. Piracy continues to eat into the profitability of these firms especially in the key emerging ICT markets of the developing world. The hunger for technology coupled with the high prices associated with accessing genuine products contribute to software piracy. In addition to these, government laxity in copyright infringement laws has also significantly contributed to countries such as India having among the highest piracy prevalence rates in the world. The results of the growing piracy rates are such that many up and coming developers find it hard to survive the market. As a result, many become highly demoralized to conduct any form of product improvement through research and development and simply buckle under the pressure of poor returns and inevitably end up collapsing (Bibby et al. 2008, p. 10-11).

Morality and ethics behind using pirated products

7 The main issue is the fact that piracy still continues with increasing prominence; among the reasons for this trend is because many individuals who use pirated software do not associate their involvement in the vice with a moral decay on their part (Duquenoy et al. 2008, p. 213). Persons will gladly display their pirated copies to friends and foes and go as far as bragging on the ease in access and costs that they had in acquiring the software. The vice has become so prevalent that any suggestions by a person to buy an expensive genuine product gets sneered at and met with suggestions of where one can access a cheaper version of the same (Shubhnandan & Nishant 2012, p. 35). This blatant abuse of morals and ethics is due to the general perception that individuals should have easy access, and at the lowest possible costs, to computer software. However, the reality is that this entitlement displays a lack of ethical responsibility as it hurts those who genuinely work hard to develop these programs (Duquenoy et al. 2008, p. 219).

Conclusion Piracy has evolved substantially from Sokol’s improvement of Robertson’s Altair 8800 computer into a thriving business on its own. Despite the fact that software piracy is a form of copyright infringement in complete disregard for intellectual property rights, the vice still continues unabated in most of the developing countries. The argument behind the high tolerance to software piracy is that it is a necessary evil to spur the acquisition and spread of technology globally. This has been due to the high costs associated with acquisition of genuine software products. The high costs have enabled dealers in pirated software to take advantage of the market and offer their products at significantly lower prices, up to 90% cheaper. The developments in internet technology

8 have served to boost the proliferation of piracy the world over due to increased access to pirated products. Ease in the use of file sharing and storage platforms is a superb example of how easy it is to access pirated software. As a result of the ease in access, genuine software developers are facing a grim economic future punctuated by low sales and loss in profitability. The net result of which has seen developers become highly demoralized and their enterprises, therefore, eventually end up collapsing. However, it is the morality of using pirated software that has considerably contributed to the spread of piracy. As long as persons remain without any ethical dilemma in using pirated products, the vice will continue to impact negatively on the genuine software developers.

Recommendations In the first place, governments need to come out strongly against software piracy so as to discourage the vice from taking more root in the ICT sector. The continued treatment of software piracy as a necessary evil, especially in the developing countries, will not be beneficial to these economies in the long run. The reason is that over dependence on pirated software will end up negatively affecting capacity building in the ICT sectors of the developing nations. Secondly, in order to root out the practice, more has to be done to eliminate the causes of piracy. In order to eliminate costs of genuine software, governmental bodies could offer tax breaks and incentives to the ICT companies. With regard to access, persons found to be engaging in piracy should face stiff penalties, regardless of the country of origin of the pirated software. It makes no sense only punishing those found pirating local technology and sparing those pirating international software; all instances should attract equal punishment as they represent

9 the same thing. Thirdly, government ought to look into means of improving the protection offered to developers so as to encourage more research into measures aimed at curtailing piracy. Fourthly, it is up to users of pirated software to look keenly at the negative impacts that the practice has on the ICT sector. Without a willingness by the consumers of piracy to change their perceptions on ethics and morality of piracy, there is no realistic option of minimizing, let alone stopping software piracy.

10 List of References Anckaert, B, De Sutter, B & De Bosschere, K 2004, ‘Software piracy prevention through diversity’, Digital Rights Management Workshop, pp. 63-71 Bibby, D, Gantz, J & White, A 2008, ‘The impact of software piracy and license misuse on the channel’, IDC Partner Piracy Impact Study, White paper sponsored by Microsoft and the International Association of Microsoft Certified Partners (IAMCP), June 2008.

Craig, P & Honick, R 2005, Software piracy exposed: Secrets from the dark side revealed, Syngress Publishing, Inc, Rockland.

Depken, CA & Simmons, L 2004, 'Social construct and the propensity for software piracy', Applied Economic Letters, vol. 11, pp. 97-100 Duquenoy, P, Jones, S & Blundell, BG 2008, Ethical, legal and professional issues in computing, Middlesex University Press, London Leinss, A 2011, The effects of software piracy on consumers and software developers, A report for CS-699 independent study.

Shubhnandan, SJ & Nishant, G 2012, ‘Software piracy among IT students of J&K: Ethical or unethical’, IJCA Proceedings on International Conference on Recent Advances and Future Trends in Information Technology (iRAFIT 2012) iRAFIT, no.1, pp. 33-36, April 2012.